You are considering buying a rental property. The property costs $2.5 million but you plan to...
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You are considering buying a rental property. The property costs $2.5 million but you plan to borrow $2 million at an interest rate of 5%. If the annual rental income, net of operating expenses (but before interest expenses and taxes), is expected to be $250,000 every year in perpetuity, and you face a 35% tax rate, what is the NPV of the investment to you, as an equity investor? (The cost of equity for real estate investments is 10% and you can assume that depreciation is offset by capital maintenance.) You are considering buying a rental property. The property costs $2.5 million but you plan to borrow $2 million at an interest rate of 5%. If the annual rental income, net of operating expenses (but before interest expenses and taxes), is expected to be $250,000 every year in perpetuity, and you face a 35% tax rate, what is the NPV of the investment to you, as an equity investor? (The cost of equity for real estate investments is 10% and you can assume that depreciation is offset by capital maintenance.)
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Related Book For
Real Estate Finance and Investments
ISBN: 978-0073377339
14th edition
Authors: William Brueggeman, Jeffrey Fisher
Posted Date:
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